For discussion
on 27 February 1998


Subhead 700 General other non-recurrent
New item "Science Park"

Members are invited to approve a new commitment of $268 million to meet expenses of the Hong Kong Science Park Corporation and its forerunner, the Provisional Hong Kong Science Park Company Ltd., for planning, developing and operating the Science Park in the initial years.


The Hong Kong Science Park Corporation (the Corporation) and its forerunner, the Provisional Hong Kong Science Park Company Ltd. (the Company), require funding for start-up purposes prior to the opening of the Science Park in 2001. Also, in its initial years of operation, the Corporation would not be able to generate sufficient income to meet its operating expenses.


2. We propose to create a non-recurrent commitment of $268 million under Head 73 Industry Department to meet expenses of the Company and the Corporation for planning, developing and operating the Science Park in the initial years.


The Case for a Science Park

3. To maintain and enhance our competitiveness in the next millennium, Hong Kong should become a knowledge and technology-based economy. A Science Park is an essential infrastructure for Hong Kong industries to move up the technological ladder and to develop towards technology-intensive and higher value-added business activities. It will strengthen the links among the higher education, research, industrial and business communities; provide the environment for technology-based firms; and help develop networks among them. It will also help position Hong Kong as a regional centre for research and development (R&D) activities as well as innovation and technological development. Given the very keen competition from other economies in the region, we consider it important that the Science Park should be established as soon as possible. We aim to complete the first two buildings of the Science Park by mid-2001 to enable the opening of phase 1 of the project in the second half of 2001.

4. The Planning Committee on Science Park (the Planning Committee) was set up in January 1997 to take forward the Science Park project. It was chaired by the Director-General of Industry (DG of I) and comprised industrialists, academics, leaders from relevant business sectors, as well as representatives of relevant Government bureaux and departments. In November 1997, the Planning Committee submitted its recommendations to Government. We have accepted these recommendations as the broad planning basis on which the Science Park project should be taken forward.

5. The Science Park will be located at Pak Shek Kok, Tai Po, occupying a total area of 22 hectares. It will be developed in phases. We intend to construct the buildings, infrastructure and other physical facilities for Science Park Phase 1 via the Public Works Programme (PWP) at an estimated project cost of $2,072 million (at December 1996 prices). The Public Works Subcommittee (PWSC) has already endorsed the upgrading of part of Project 3GA "Science Park at Pak Shek Kok - phase 1 - site investigations and consultants' fees" under Head 703 Buildings of the Capital Works Reserve Fund to Category A of the PWP at an estimated cost of $54.8 million (in money-of-the-day (MOD) prices) 1

Institutional arrangement

6. We need to concurrently set up the institutional arrangement to take forward the Science Park project. We agree with the Planning Committee's recommendation that a Hong Kong Science Park Corporation should be established by law to plan, develop and manage the Science Park. This arrangement is in line with that for similar industry support organisations, such as the Hong Kong Industrial Estates Corporation and the Hong Kong Industrial Technology Centre Corporation. However, given the time required to complete the legislative procedures for establishing a statutory corporation, we plan to set up a Provisional Hong Kong Science Park Company Ltd. under the Companies Ordinance soon after Members' funding approval is obtained to start planning the Science Park as soon as possible. The Company will be governed by a Board of Directors comprising Government representatives. It will dissolve on the day when the Corporation comes into existence. All assets of the Company would be transferred to the Corporation.

Funding requirement

7. The Company/Corporation would need resources to set up an office and to recruit staff to establish the non-physical infrastructure of the Science Park. Work in this respect includes planning for the provision of facilities and services for tenants; implementing an effective global marketing strategy for the Science Park; setting up mechanisms to operate the Science Park; establishing linkages among the industrial, financial and business communities, local and overseas higher education institutions and other science parks to facilitate technology transfer and commercialisation of R&D activities, etc. All this essential work must commence in 1998 to enable the Science Park to be functional when Phase 1 opens in the second half of 2001.

8. In the long run, the Science Park Corporation should be able to conduct its business according to prudent commercial principles and to meet recurrent expenses from its income. While we do not expect the Science Park to rely on Government financing indefinitely, we would need to provide sufficient resources to meet its operating expenses to cover the initial operating deficit before it reaches the break-even point.

9. Taking account of the Planning Committee's financial projections, we estimate that the Company/Corporation would require a total of $268 million (in MOD prices) to meet its recurrent expenses for the period from 1998-99 to 2004-05 before it can support itself on a self-financing basis. These projections are based on certain assumptions and the best information available which may need to be adjusted in the light of actual experience. A 20-year projection of the estimated income and expenditure of the Science Park operation is at the Enclosure.

10. Having regard to the importance we attach to the Science Park project and the overall resource availability, we propose to meet the expenses for the planning, development and initial operation of the Science Park through a capital commitment of $268 million. We will require the Corporation to operate in a prudent manner so as to, barring changes to the projections referred to in paragraph 9 above, become self-financing before exhausting the total approved commitment. If changing circumstances justify a higher level of Government funding support before the Corporation becomes self-financing, we will revert to this Committee for the necessary approval.


11. To ensure the proper use and disbursement of funds by the Company/Corporation, DG of I will act as the vote controller for the amount of funds sought from the approved commitment. In performing his role as a vote controller, he will set out the detailed financial control mechanism in a Memorandum of Understanding (MOU) to be signed with the Company/Corporation. The MOU will require, among other things, the Company/Corporation to prepare and submit to DG of I its annual estimate of income and expenditure. DG of I will, in consultation with the Secretary for Trade and Industry and the Secretary for the Treasury, assess the requirements before the budget is approved and the cash flow requirement accepted for inclusion in the annual Estimates. The Company/Corporation will have to comply with an agreed set of financial, accounting and procurement procedures.

12. To provide greater flexibility to the Corporation in planning its resources with a view to achieving the aim of self-financing as early as possible, we may consider providing the residual amount in the approved commitment in the form of a one-off grant to the Corporation after it has been set up by statute. The enabling legislation for setting up the Corporation will include provisions requiring the Corporation to conduct its business according to prudent commercial principles, to meet expenses from revenue and to pay any surplus funds to Government if so directed by the Financial Secretary.


13. Based on the financial projections at the Enclosure, it is estimated that the cash flow will be as follows -

$ million



















14. Subject to Members' approval, we will approve supplementary provision required in 1998-99 through delegated authority. We will, based on our assessment of the Company/Corporation's annual budget thereafter, include the necessary cash flow provision in future Estimates.


15. The Science Park project was one of the major commitments made by the Chief Executive in his Policy Address in October 1997. The Science Park would be developed in three phases : eight hectares for Phase 1 and seven hectares each for Phases 2 and 3. It would provide office premises in multi-tenant buildings for rent to technology-based companies and land plots for lease to firms which wish to purpose-build their own premises for intensive R&D activities. Ancillary supporting facilities, including restaurants, retail services and on-site residential accommodation would be provided. The Science Park would be a low-density development with a pleasant park-like environment in line with international standards in order to attract high-tech firms and researchers, both local and overseas. Apart from physical facilities, the Science Park would develop linkages with local and overseas higher education institutions, other science parks, and business, financial and industrial communities to facilitate technology transfer and commercialisation of R&D activities.

Trade and Industry Bureau
February 1998

1.Subject to Finance Committee's approval of the PWSC recommendations at the same meeting on 27 February 1998, we will proceed to carry out site investigations, planning of the phased development of the entire Science Park, schematic planning of Phase 1 of the Science Park, drainage impact assessment study, and detailed design and contract documentation for the first two buildings and associated landscaping and external works.